Negotiated cash fed cattle trade developed on Friday with live sales $2 higher at $124/cwt. in the Southern Plains and Nebraska; $2-$4 higher in the western Corn Belt at $125. Dressed sales were mostly $4 higher in Nebraska at mainly $199 and $3-$4 higher in the western Corn Belt at $198-$199.
Cattle futures softened though, amid lower outside markets fueled by heightened geopolitical tensions (the U.S. military strike in Iran), as well as what appeared to be some liquidation by non-commercial traders in the previous session. There was also some question about how the military action in Iran might affect the scheduled signing of the phase-one trade deal between the U.S. and China. Lean Hogs closed limit-down in spot Feb and near limit-down in the next two contracts.
Except for 35¢ higher in away Apr, Live Cattle futures closed an average of 65¢ lower (7¢ lower to $1.05 lower in spot Feb).
Except for 7¢ higher in in the back contract, Feeder Cattle futures closed an average of 96¢ lower.
Wholesale beef values were steady on Choice and higher on Select with moderate to fairly good demand and heavy offerings, according to the Agricultural Marketing Service.
Choice boxed beef cutout value was 24¢ higher Friday afternoon at $208.49/cwt. Select was $2.76 higher at $205.39.
Grain futures lost ground on the day, between anemic weekly export data, as well as wonderments about the potential fallout from the U.S. defensive action in Iran.
Corn futures closed 3¢ to 5¢ lower through Dec ’20 and then mostly 2¢ lower.
Soybean futures closed 10¢ to 14¢ lower through Sep ’20 and then mostly 3¢ to 5¢ lower.
Major U.S. financial indices closed strongly lower Friday, pressured by the U.S. air strike in Iran and the subsequent spike in oil prices.
West Texas Intermediate Crude Oil futures on the CME closed $1.58 to $1.87 higher through the front six contracts, but well off of session highs.
Weaker than expected manufacturing data also weighed on markets.
Although the overall economy grew for the 128th consecutive month, economic activity in the manufacturing sector contracted in December, according to the latest Manufacturing ISM® Report On Business®.
“The December PMI® registered 47.2%, a decrease of 0.9 percentage point from the November reading of 48.1%. This is the PMI’s lowest reading since June 2009, when it registered 46.3%,” says Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “…Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth.”
The Dow Jones Industrial Average closed 233 points lower. The S&P 500 closed 23 points lower. The NASDAQ was down 71 points.
Although the impact of African Swine Fever (AFS) on domestic animal protein prices was slow to materialize, it began to show up by the end of the year.
“As a large share of beef from Australia and New Zealand go to China, it is forcing a reduction in the quantity of manufacturing beef to the U.S.,” explained RaboResearch Food and Agribusiness analysts, in that organizations November quarterly report. “As a result, prices of Australian and New Zealand 90% trimmings delivered to the U.S. currently hold a $54/cwt. premium (USD) to domestic trimmings. This is forcing U.S. quick service burger restaurants to look for domestic alternatives for supplies, supporting U.S. cattle and beef prices. This situation is not expected to be quickly resolved and will be an interesting market development to watch in the coming year.”
Until ASF, China produced about half of the world’s pork supply.
“By the end of 2020, China’s total swine herd is forecast to decline to 275 million head, down nearly 40% since the beginning of 2018, before the crisis began,” according to Livestock and Poultry: World Markets and Trade from USDA’s Foreign Agricultural Service (FAS). “Many producers have exited the industry and others are reluctant to restock due to ongoing disease risk. Pork production is forecast 25% lower in 2020 due to a sharply lower swine herd. Lower domestic supplies will boost demand for foreign pork, resulting in record imports. However, consumers will feel the pinch of lower pork supplies, with a 32% decline in per capita pork consumption over two years.”